U.S. Stocks May Move Back To The Upside In Early Trading
March 06 2024 - 9:05AM
IH Market News
The major U.S. index futures are currently pointing to a higher
open on Wednesday, with stocks likely to move back to the upside
after moving notably lower over the two previous sessions.
The futures remained positive as the Federal Reserve released
Fed Chair Jerome Powell’s prepared remarks before the House
Financial Services Committee.
Powell will tell members of Congress that it will likely be
appropriate for the central bank to begin lowering interest rates
at “some point this year” but reiterate officials need “greater
confidence” inflation is moving sustainably toward 2 percent.
The Fed Chief described the economic outlook as “uncertain” and
said progress towards the Fed’s 2 percent inflation objective is
“not assured.”
“Reducing policy restraint too soon or too much could result in
a reversal of progress we have seen in inflation and ultimately
require even tighter policy to get inflation back to 2 percent,”
Powell said.
He added, “At the same time, reducing policy restraint too late
or too little could unduly weaken economic activity and
employment.”
Powell said future interest rate decisions will be based on
careful assessment of the incoming data, the evolving outlook, and
the balance of risks.
Meanwhile, a report released by payroll processor ADP showed
private sector employment in the U.S. increased by slightly less
than expected in the month of February.
Following the modest pullback seen during Monday’s session,
stocks showed a more substantial move to the downside during
trading on Tuesday. The major averages all moved notably lower,
with the tech-heavy Nasdaq showing a particularly steep drop.
The major averages climbed off their worst levels going into the
close but remained firmly negative. The Nasdaq plunged 267.92
points or 1.7 percent to 15,939.59, the S&P 500 tumbled 52.30
points or 1.0 percent to 5,078.65 and the Dow slumped 404.64 points
or 1.0 percent to 38,585.19.
The weakness on Wall Street came as traders continued to cash in
on recent strength in the markets, which lifted the S&P 500 and
the Nasdaq to record closing highs last Friday.
Uncertainty about the outlook for interest rates also weighed on
the markets ahead of congressional testimony by Federal Reserve
Chair Jerome Powell.
Powell is due to testify before the House Financial Services
Committee on Wednesday and the Senate Banking Committee on
Thursday.
The Fed chief is likely to reiterate recent comments stressing
the central bank needs greater confidence inflation is slowing
before cutting interest rates.
The next monetary policy meeting is scheduled for March 19-20,
with the Fed widely expected to leave interest rates unchanged.
In U.S. economic news, a report released by the Institute for
Supply Management showed U.S. service sector growth slowed by
slightly more than expected in the month of February.
The ISM said its services PMI fell to 52.6 in February after
climbing to 53.4 in January. While a reading above 50 still
indicates growth, economists had expected the index to show a more
modest decrease to 53.0.
The Commerce Department also released a report showing a steep
drop in new orders for U.S. manufactured goods in the month of
January.
Software stocks showed a substantial move to the downside on the
day, resulting in a 3.4 percent nosedive by the Dow Jones U.S.
Software Index down.
Among software stocks, GitLab (NASDAQ:GTLB) plummeted by 21.0
percent after the company reported better than expected fourth
quarter results but provided disappointing guidance.
Significant weakness was also visible among semiconductor
stocks, as reflected by the 2.1 percent slump by the Philadelphia
Semiconductor Index.
Commercial real estate, housing and transportation stocks also
saw notable weakness, while banking stocks showed a strong move to
the upside.
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